'Ponty' Chadha's death in shoot-out revives crony capitalism debate

People gather outside the farmhouse where liquor baron Ponty Chadha and his brother Hardeep gunned each other down during a confrontation over a property dispute.

NEW DELHI // The death of Gurdeep "Ponty" Chadha in a shoot-out with his brother has revived the debate about political funding and crony capitalism in India.

Chadha, a 55-year-old liquor and real-estate magnate with massive influence in New Delhi and the states of Uttar Pradesh and Punjab, is alleged to have accumulated his wealth through illegal political funding in exchange for favours from politicians.

He was shot and killed at a luxury farmhouse on the capital's outskirts on Saturday. His younger brother Hardeep also died in the shoot-out in a real-estate dispute.

Estimates of Chadha's wealth are imprecise, but they hover at the US$10 billion (Dh36.7b) mark.

Most of that was accumulated at great speed over the last decade, as he grew progressively closer to parties such as the Bahujan Samaj Party (BSP), the Samajwadi Party (SP) and the Congress.

Chadha won the attention of these parties by being a generous donor, although the extent of which remains unknown.

Constrained in their fund-raising and spending by the Election Commission, India's political parties illegally raise more money on the side to win elections.

The 2011 edition of the Global Integrity Report gave India a score of only 28 out of 100 on the transparency of its political funding - worse than countries such as Liberia, Tajikistan and Indonesia.

The allegations against Chadha, of corruption and of bankrolling political parties illegally, have never been proven.

In February this year, tax officials raided Chadha's offices and some of his homes - nearly 20 premises in total - but they came up with no evidence to support these allegations.

"To run for a state assembly seat or a seat in parliament, a campaign needs between 10 and 25 million rupees," said Ajay Kumar Singh, managing editor of Governance Now magazine.

Anil Bairwal, the national convener of a New Delhi-based non-profit called Association for Democratic Reform, pegged the expense even higher: at about 50 million rupees.

The raising of such funds "has been an accepted practice and Ponty Chadha was no exception", said Mr Singh.

"There are others like him."

Implicit in such donations is the expectation of a quid pro quo, the lifeblood of crony capitalism. Chadha would have expected favours in the form of government contracts doled out to him and his family and friends.

Such transactional funding operates at even a very local level in India, said Mohit Satyanand, the chair of a New Delhi-based think tank called the Liberty Institute.

"There's an atmosphere of fear and mistrust when it comes to relationships between medium-sized businessmen and political powers," Mr Satyanand said.

In return for his lavish funding, Chadha managed to obtain for himself the monopoly of the wholesale liquor business in Uttar Pradesh, a state with a population of 200 million.

In 2005, he also won an exclusive state government contract to supply midday meals to poor schoolchildren in the state.

Chadha's empire, which began humbly, with a snack-kiosk outside a liquor store, had expanded to include paper and sugar mills, a chain of cinema theatres, multiple farmhouses, and shopping complexes.

He even leased 800,000 hectares of land in Ethiopia, which he had planned to farm with labourers shipped over from Punjab.

His business interests and his political clout have provided him with further founts of money. He travelled everywhere with an entourage of armed guards.

"He used to charge 10-20 rupees extra on every bottle of liquor he sold," said Badri Narayan, an Uttar Pradesh-based political analyst, "and his salespeople would clearly say: 'We are collecting funds for an important person.'"

"No one questioned it because he received support from the politicians," Mr Narayan said. "He was beyond [political] parties."

It aroused particular indignation when Chadha won the midday meal contract. Given its scale - running into millions of poor schoolchildren across Uttar Pradesh - the 90-billion-rupee contract made Chadha wealthier still.

Harsh Mander, a Supreme Court food security commissioner, called it "a scandal of huge proportions".

"The Supreme Court clearly directs that food should be provided by local groups, partly because the idea of a balanced, nutritious diet should be based on a child and their environment instead of being manufactured by a corporation," Mr Mander

Instead, the Uttar Pradesh state government, currently under the control of the SP and previously run by the BSP, has "completely violated what the Supreme Court said and have given [the contract] to dubious kinds of business people", Mr Mander said.

"It is a nexus between people who are corrupt."